Kate Forbes: Let's think about the root causes of raising taxes

That’s because the people of Scotland are smart enough to understand that independence isn’t the preserve of any single party or one particular leader. It is a national movement that can rise above politics, policies and personalities.

In the past few weeks, I have been meeting with SNP branch members in my own constituency. Many are also involved with Yes groups in the Highlands. Some of those conversations start quite pessimistic, but all finish a lot more hopeful. That’s because once we’ve lamented some of the challenges of the past year, we focus on the future. And the future is bright.

READ MORE: SNP launch revamped Yes website with support from new Rebuttal Unit

There’s no doubt that every political party, politician and government should be open to constructive criticism and feedback. None of us get everything right, and it is the mark of strength to stop, consider and change course. That strength has characterised the First Minister’s tenure.

There is a healthy debate within the SNP, and it is unfortunate that any form of polite disagreement is characterised as hostility and division by some commentators. Debate thrives within self-assured and self-confident movements, and that is precisely what the independence movement should be.

After 13 years of Tory rule, all of the independence movement’s greatest fears and warnings about the UK have come true. The party reputed for economic stability has plunged the UK, and Scotland with it, into economic turmoil. That has consequences for all of us personally – stubbornly high inflation, sky-high food prices, devastating energy costs. There is a reason that retail footfall is down this Christmas, because nobody’s got any spare cash to splash this festive period.

But it also has a massive impact on our public finances, and that in turn inevitably affects every public service. A couple of weeks ago, the independent Office for Budget Responsibility, who do the forecasting for the UK Budget, gave evidence at the Finance Committee in the Scottish Parliament. I’ve re-read the transcript of the exchanges several times and they still shock me.

Richard Hughes, chair of the Office for Budget Responsibility, said: “[The UK is] approaching £3 trillion worth of debt, which means that our debt to GDP ratio is approaching 100% of the size of the UK economy … That is more than three times what it was at the start of the century.”

READ MORE: Architect of SNP Growth Commission speaks out against tax rises

That is a staggering increase. But it has real-world implications for your uses. Mr Hughes continued: “That means that a larger and larger share of government revenue is being consumed by the need to service that large stock of debt: those debt service costs now come to more than £100 billion a year, which means that, if debt servicing were a UK Government department, it would be the second largest after the National Health Service.”

He went on to say that governments around the world had seen debt increase: “The UK is not unique in that respect, but we have experienced a more significant impact of rising interest rates on the cost of government debt than have most other G7 economies.”

You are permitted to ask: why is that? Because only one party has been in charge of macro-economic policy in the UK, for more than a decade.

My colleague Kenny Gibson chairs the Finance Committee and put this in perspective. He told me that interest on the UK’s debt will be £22bn higher this year than was expected in March and will now reach £116bn. He calculated that this equates to £318m of taxpayers’ money per day. Or, six times Scotland’s annual NHS budget.

You have to read that a few times to let it settle in. These figures are so monumental that they are actually difficult to compute. Yes, the pandemic, the financial crash and the cost of living crisis have all had an impact. But most commentators are quick to point out that other countries have experienced similar issues, and yet the impact has been less pronounced and long-lasting.

So, it stands to reason that after a decade of Tory mismanagement, our public and personal finances are under immense strain. It is in that context that the Finance Secretary had to introduce last week’s Budget. Nobody else has to bear the burden of making impossible choices like she does. Most of us are able to make further asks, without the hard work of choosing what to reduce.

Of course, the main driver of the Scottish Government Budget is still the block grant. That funding isn’t determined by need, but instead by what the Chancellor spends in England. According to the OBR, he reduced the real spending power of UK Government departments in England by about £19bn over the five-year forecast period. That is the health service, education and transport, to name just three.

Tax has dominated the post-Budget analysis, but that is for one massive reason. Sluggish economic growth, slower migration to Scotland and UK Government cuts to public services put the Scottish Government at a cross-roads. The only way to increase available public revenue is to reform public services or hike taxes. And as the Scottish Parliament only has very limited powers over tax, the burden falls on income tax.

And so as important as it is to debate the rights and wrongs of increasing taxes, this Budget should prompt us to wrestle with the root causes. In no particular order, those are: the Tories, economic stagnation and Scotland’s demographic crisis. If we didn’t have that impossible trio to grapple with, it would be unlikely that we’d see the Finance Secretary raising taxes.

I’m constantly going on about the tax base. What I am really talking about is people. Calling for a bigger population, through inward migration and retaining our people, is exactly the same thing as wanting to see the tax base increase.

READ MORE: UK economy at risk of recession after worse than expected third quarter decline

Scotland has a massive demographic challenge, with very little forecast growth over the next 20 years. The proportion of working-age adults in some parts of the country is dwindling rapidly. Continually increasing taxes is counter-productive over the long term, even if you agree with it ideologically, because it ultimately reduces public revenue.

The forecasts for what the Scottish Government will raise through its latest changes to the top tax bands is just over £80m. That isn’t to be sniffed at. But the forecasts also suggest they’ll lose £118m that they could have raised because of behavioural change – people leaving or reducing their hours or treating income differently. That illustrates that we need to invest in people, in job creation and in better wages. That way the tax take will increase.

If support for independence has remained rock solid in 2023, then the aim for 2024 should be to inspire more people to choose a better, independent future. We can do that through radical change. Scotland is big enough, smart enough and wealthy enough, but people need to see it to believe it. We’ve seen over the past 10 years that remaining within the UK isn’t risk-free, and if anybody thinks that Labour will be the transformational power we need, then they’ve not been listening very hard to Sir Keir Starmer.